Download presentation
Presentation is loading. Please wait.
Published byClara Ryan Modified over 9 years ago
1
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-1 chapter 13 The expenditure cycle Learning objectives –To learn the expenditure cycle business activities. –To learn how to flow chart the expenditure cycle business activities. –To understand the processing of expenditure cycle transactions using a computer. –To know what the control practices and procedures are in the expenditure cycle.
2
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-2 key terms carrying costs economic order quantity materials requisition note maximum stock level minimum stock level ordering costs payment voucher purchase requisition reorder level reorder quantity storekeeping
3
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-3 Expenditure cycle Deals with transactions involved in purchasing goods and services Custodianship of goods and materials purchased Cash and credit payments
4
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-4 Expenditure cycle business activities Main functions (cash purchase): requests for purchases ordering goods to be purchased receiving delivery of goods purchased storekeeping dealing with goods to be returned payment of purchased goods and services
5
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-5 Expenditure cycle business activities Additional functions (credit purchase): applying for credit facility from supplier recording accounts payable requesting adjustment notes checking periodical statements from suppliers approving vendor invoices
6
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-6 Expenditure cycle business activities Categories of activities in the expenditure cycle: 1.Requesting purchases 2.Placing orders with suppliers 3.Receiving goods 4.Storekeeping 5.Processing supplier invoices 6.Cash disbursements
7
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-7 Requesting purchases Purchasing department responsible for purchases Goods categorised as: –general goods –special items Purchase requisition used for special orders to ensure: –control and accuracy
8
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-8 Placing orders with suppliers This is achieved by: identifying supplier –price and quantity available –delivery time –terms and delivery placing the order with supplier –in writing on serially numbered forms –description, quantity, unit price, total price, trade discount and delivery date
9
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-9 Receiving goods Goods accompanied by delivery note showing: –description, source and quantity delivered –space for signature of person accepting goods Goods checked for quantity and quality Goods received note raised and attached to delivery note for filing. A copy is sent to accounts payable department
10
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-10 Storekeeping Goods received are stored in a secure place Safeguarded by authorised persons Released on proper authorisation – goods/materials requisition note Authorised dispatch note required for dispatch of goods sold
11
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-11 Storekeeping functions Maintain orderly store Prevent waste and deterioration of goods Secure from unauthorised personnel Keep records and issue goods Raise purchase requisitions Receive goods delivered
12
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-12 Stock levels Maintain appropriate level to facilitate production and sales functions Maintain a ‘buffer’ of stock for emergencies
13
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-13 Physical stock verification Inventory is counted and amounts and other details are recorded on stock sheets Verification objectives are: –accounting valuation –loss through theft or misuse –physical state of stock –allow proper cut-off procedures to be carried out (i.e. inventory is counted only if invoices have been received and processed)
14
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-14 Perpetual inventory system Maintains a set of records that ensure that stock movements are recorded on a continuous and consistent basis by competent staff Stock cards maintain a record of stock movements in the stores Accuracy is verified by a stocktake Physical stock is compared to records to identify errors
15
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-15 Processing supplier invoices Tax invoice is received and checked for accuracy using goods received note Liability is recorded when tax invoice is received and verified Accounts payable may be adjusted by adjustment or credit notes received for returned goods
16
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-16 Cash disbursements The activity of settling a debt by paying for the goods and services received completes the expenditure cycle Supplier payments may take the form of: –cash –cheques – most common form of payment –bank transfers –direct deposits or EFT Details of all payments are recorded in the cash payments journal
17
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-17 Flowchart for purchasing function
18
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-18 Flowchart for purchase returns function
19
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-19 Internal controls for expenditure cycle Prenumbered purchase orders Authorised personnel to initiate all purchases Deliveries accepted on verification of purchase order Invoices, purchase orders and receiving reports matched to verify invoice for processing and payment Expected refunds are followed up Paid invoices are cancelled with a stamp – ‘paid’ or punch
20
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-20 Internal controls for expenditure cycle (cont.) Cheque signatories have limits Authorised person responsible for petty cash fund Accounts payable is reconciled on a regular basis Inventory is protected and accounted for both physically and in terms of dollar value Reorder levels are maintained Proper authorisation procedures apply for release of goods from stores
21
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-21 Computer application systems for the expenditure cycle Computers play an important role where large numbers of transactions are processed: –record the information in the same categories as a manual system –quick production of the documentation required –reduce clerical handling errors –easily generate detailed reports for management use –reduce errors in pricing etc. –enable maintenance of large perpetual inventory systems with a minimum amount of labour costs
22
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information & Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by Kaye Watson. 13-22 Controls in the computer environment Application controls required: Input controls –detect and prevent errors when data is input Processing controls –detect and prevent errors while processing is in progress Output controls –detect and prevent errors in outputs from processing
Similar presentations
© 2024 SlidePlayer.com. Inc.
All rights reserved.